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Texas Coastal Property a Shore Thang

Not since the radio broadcasts of Eddie Chiles during the 1980’s which prompted widespread displays of “I’m Mad Too, Eddie” bumper stickers - has Texas needed a spokesman - to combat the National Press Corps reluctance to say anything positive about Texas' real estate sales, financing, the economy, or homeowners.

The only thing slowing down Texas coastal real estate sales is all the negative news flowing out of California and Florida. The daily barrage of negative news in the national press has made millions of potential buyers, baby boomers and retirees gun shy when it come to real estate investments.

The floodgates of negative vibes reverberate throughout the industry. The fact is that the problems of California and Florida do not apply on the Texas Coast and here is why:

MLS figure show a slowing in the Texas Coastal market; however
Texas Coastal Properties still greatly outperform the nation
and fourth quarter appreciation is at 6.9%.
  • Texas will outperform most of the nation in home appreciation.
  • Texas will outperform the nation in employment.
  • Texas is not forecast to have a major recession like Florida and California
  • Texas has many economic advantages over the national average.


Appreciation

While appreciation has significantly slowed nationwide Texas appreciation is holding its own.

Texas real estate appreciation is strong according to OFHE, (Office of Federal Housing Enterprise). Home prices have decelerated in the last year. OFHE’s House Price Index (HPI) reported price growth of 3.2 percent for the U.S. as a whole, down sharply from the 10.0 percent price increase over the preceding four quarters. Texas on the other hand has appreciation of 6.9%, more than double the National average.

There are several reasons Texas coastal properties are holding value.

Texas coastal property is substantially undervalued compared to the coastal properties in Florida and California. California and Florida enjoyed widespread national news coverage which led to wild growth and speculation in their coastal properties. Many areas in Florida and California are besieged by the nation’s highest foreclosure rates.

While growth and appreciation is slowing along the Texas coast, the appreciation is outpacing the national average and coastal area foreclosures are not apparent. 


You would think from reading the national press that a few areas in the Midwest, the East Coast,
California and Florida are the entire country.

We all know this isn’t true as this chart plainly shows.

Employment and Economic Growth

One of the most important aspects for the Texas coast is that while national economic growth is expected to continue to slow, Texas is still expected to experience an Economic Boom.

State job growth of 3.1 percent last year was triple the nation’s 1 percent—and exceeded the state’s long-run average of 2.8 percent for the third year in a row.] While declines in homebuilding were sizable, overall construction remained at high levels in Texas. Oil and gas drilling returned to heights not seen since the early 1980s energy boom.

A Texas recession isn’t in the forecast. A relatively low cost of living continues to attract firms and residents to the state, and an economy that is more globally integrated than in other states boosts demand for Texas products and services. The state remains the global epicenter for a prosperous energy industry. And while real estate activity is slowing, Texas markets are healthier than those in many other parts of the country.

The Texas economy had a full head of steam as the storm arrived, and odds are good that it will handily outperform the rest of the country in 2008. Even so, the expansion will probably be below average for the state, with job growth likely near 2 percent.

The banking system is welcoming back many of the more creditworthy customers, but the process is expected to take some time. However, Texas coastal property is the land of second homes. The majority of second home purchasers can afford larger down payments; have above substantially above average credit and enough income to lead the industry to recovery once the mortgage situation corrects itself. Most important, while economic growth is expected to continue to slow, Texas is still expected to outpace the national average.
In the longer term, Texas’ location and cost advantages, fast-growing population and relatively buoyant economy put the state’s housing industry in a strong position to respond when demand turns the corner.
The Texas Advantages
All circumstances point toward a
Texas-sized boom

between 2005 and 2030.
Texas will be affected by these economic challenges, but the Lone Star State has advantages that will help it weather the storm in 2008. 

Exports: Texas exports more than any other state. Its international connections, large seaport and good distribution network help businesses find global markets when U.S. demand slows.

Over the past year, U.S. and Texas exports have been stimulated by declines in the dollar’s value that have made these products less expensive in many countries. Not surprisingly, the rise in Texas exports has been greatest where currencies have appreciated the most against the dollar. Shipments experienced double-digit growth to France, Germany, Brazil, India, Japan, Singapore and Taiwan. Ports of Houston and Galveston are expanding to meet demand.

Energy: Texas is one of the few states that can claim high energy prices as an advantage.

In Texas, high prices stimulated worldwide demand for equipment and services and led to a resurgence of drilling in the state. The drilling surge has meant additional property owners are profiting from their mineral rights.

Expansion of refinery operations will pour over twenty billion dollars into Texas coastal areas of Galveston, Port Arthur and Beaumont. Ground has already been broken by Motiva on the largest refinery project in our nation’s history.

Labor Advantage: Texans are among the state’s biggest assets—they provide the labor necessary for strong job growth. In recent years, the population has grown twice as fast in Texas as the rest of the country.

Rapid job growth has given the state an increasing share of U.S. employment. Roughly 7.6 percent of the country’s nonagricultural workforce is in Texas, and that figure is growing. Last year, the Texas economy added workers at a faster rate than the nation in all sectors, with the state creating 31 percent of the country’s private nonagricultural jobs. The Texas construction sector added 27,000 jobs—up 4.3 percent—while U.S. construction employment fell by 222,000—down 2.9 percent.

The real estate advantage: Texas real estate markets are no strangers to boom-and-bust cycles. A construction spike in the early 1980s left a large inventory of homes, offices and retail space that took a decade for the state to absorb. Memories of earlier excesses may have helped temper building here in the face of rapid growth in the rest of the country.

More likely, Texas real estate markets have stayed closer to fundamentals because strong economic growth absorbed new space as fast as builders could generate it.

With plentiful land, relatively few regulations and a large crew of workers, the Texas construction industry knows how to boom. Between 2000 and 2007, the state added over 1 million single-family homes. Even with this surge, the supply of homes doesn’t appear to be too far ahead of demand.

Baby Boomers: The first wave of 3.2 million baby boomers turns 62 next year — 365 an hour. As to what affect this tremendous wave of retirees will have on the Texas Coast. The Lone Star State is being “discovered” by the rest of the country because of its affordable housing, lower cost of living and cost of business, greater employment opportunities and appealing lifestyle.
Conclusion:

The Texas housing industry faces a difficult year in 2008. Many potential homebuyers are unable to get financing or await news of a housing turnaround.

While Texas’ housing sector is weakening, it remains healthier than the national average, and Texas metro markets are better positioned than many other parts of the country to thrive when housing demand turns the corner. Texas owes its housing affordability to ample land supply and relatively few regulations on construction.

Although conditions were better than in the rest of the country, homebuyers turned apprehensive, fueled by negative press out of California and Florida which dampened demand for both new and existing homes. In addition, more stringent lending standards associated with the subprime mortgage crisis makes financing more difficult than it has been in years.

According to anecdotal reports including the Dallas Fed’s Beige Book, the higher-priced segment of both markets remained strong throughout the year, but sales of lower-priced homes dropped dramatically after August 2007. Texas coastal properties value remains strong.

In the longer term, Texas’ location and cost advantages, fast-growing population and relatively buoyant economy put the state’s housing industry in a strong position to respond when demand turns the corner.

Is the near future for Texas coastal property sales a bed of roses? Of course not!

However, the experts all agree that we are in a better position than the rest of the nation and on the cusp of a significant boom once the economy and the mortgage industry correct themselves as they always do. Sales have slowed, not stopped and the go getters of the real estate industry are still garnering sales.

While the current market conditions are tough, the future for the Texas coast is bright; we just need to scream it from the rooftops till someone in the national press takes notice.

Till then our fearless writers at the
Austin American Statesman, The Texas Real Estate Center and Texas Gulf Coast Online
will continue the battle to achieve national attention for Texas.



Click on the links below to learn more about the current status of the Texas Gulf Coast Real Estate markets.

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